Analysis and criticism of America's most prominent public intellectual and champion of Keynesian economics. I am part of the Austrian School of Economics, and I critique Krugman's writings from that perspective.

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Thursday, November 17, 2011

Krugmanomics: Partisanship uber alles

In his most recent column, Paul Krugman demonstrates once again that he is first and foremost a political operative, or, more accurately, a political hack. Despite the fact that he is a highly-decorated and feted academic economist, his economic analysis does not differ from what Paul Begala or Chris Matthews might write.

In writing about the work of the bogus "supercommittee" that Congress is using to cover its latest budget shenanigans, Krugman tries to convince us that the Wise Democrats are trying to save the economy even thought the Evil Republicans are trying to throw even more Americans out of work:

In Democrat-world, up is up and down is down. Raising taxes increases revenue, and cutting spending while the economy is still depressed reduces employment. But in Republican-world, down is up. The way to increase revenue is to cut taxes on corporations and the wealthy, and slashing government spending is a job-creation strategy.

So, at least Krugman is now willing to part with some of the Holy Doctrines of Keynesianism and advocate tax increases during a depression. (Herbert Hoover and Congress massively raised taxes "on the rich" in 1932, and we know how well that turned out, but since Krugman wants us to believe that the Progressive Hoover was radically laissez-faire, that is a bit of history that Krugman manages to shove down the Orwellian Memory Hole.)

Of course, Krugman also decides to rewrite more recent history, that being the state of the economy in 2000. The Great One declares:

Remember, the U.S. fiscal outlook was pretty good in 2000, but, as soon as Republicans gained control of the White House, they squandered the surplus on tax cuts and unfunded wars.

I will agree with him on the wars and I always have been on the record as opposing them, but at least I never have tried to write that wars also can create a "fiscal stimulus." However, one might just forget that in 2000, the infamous Stock Market Bubble popped, and for all of Krugman's claims that the Clinton administration was the soul of responsibility, its credit-fueled boom of the late 1990s could not be sustained.

However, Krugman wants us to forget that part, just as he has seen fit to rewrite the history of financial deregulation in order to fit his partisan agenda. Now, it is one thing for someone like Paul Begala to claim that the U.S. economy was in perfect shape in 2000, and that the recession of 2001 was the result of the Bush administration "talking down the economy."

However, Begala is nothing but a partisan hack, a shill for a political party, and he has about as much credibility as Karl Rove. I am not shocked or even upset when Begala acts like a political operative any more than I am surprised when my dogs bark at strangers. Dogs bark, and political operatives lie, as such things are in the DNA of both.

It is disconcerting, however, when an "elite" academic economist tries to outdo someone like Begala. As for the "super committee," it is bound to fail not because Democrats are Crusaders for Right And Truth and Republicans are the Second Coming of Darth Vader, but because delusion reigns in Congress, the White House, and in the economics department at Princeton University.

This committee will fail because no one on it is willing to face up to the fact that the U.S. Government has brought disaster upon the economy and except for a few lonely prophets in the House of Representatives (who are openly disdained for their courage), no one in Washington is willing to admit that this current path is not sustainable. The "cuts" in spending are laughable, since they only would be cutting some of the proposed INCREASES in spending. (Only in Washington and at Princeton is a smaller increase in spending called a "cut.")

Yes, failure will come not because Democrats are good and Republicans are evil, but rather because Democrats and Republicans refuse to recognize how they have run this country into utter insolvency.

29 comments:

Substitute "the great one" for "the President" and "Mr. Krugman" for "Mr. Obama" and you sound like the centrist pundit in the part of Krugman's article you conveniently left out: Pundit: “Why won’t the president come out for a mix of spending cuts and tax hikes?” Mr. Obama: “I support a mix of spending cuts and tax hikes.” Pundit: “Why won’t the president come out for a mix of spending cuts and tax hikes?” Oh, and it's not only in Washington and at Princeton that a smaller increase in spending called a cut. This also works for corporate accounting and bankers' bonuses.

"Herbert Hoover and Congress massively raised taxes "on the rich" in 1932, and we know how well that turned out..."

Tragically, we do NOT know. That's why I have so many friends from college and graduate school who are certain that "cutthroat capitalism" or "the unregulated market" is what brought us to the point where "the rich get richer and poor get poorer." In contrast, one must suppose, to egalitarian paradises like North Korea.

You continue to utterly mis-represent Krugman's argument to serve your own ideological agenda. Ironic, given your accusation that Krugman is not better a partisan hack than Chris Matthews.

First, where does Krugman say that Democrat's are good and Republicans are evil. He instead points out that both come from different moral universes - democrats generally see the welfare state as morally imperative while republicans view it as a confiscation of wealth. Would you disagree with this view?

Second, he notes the differences with attitudes toward economic policy - the efficacy of tax cuts, the role of regulatory uncertainty (implied in the article). Because he disagrees with you does not make him partisan.

Third, you incorrectly indicate that Krugman thought our economic conditions was good in 2000 instead of our fiscal conditions - which is what he wrote. Krugman would admit that the east of credit, which he did initially support, provided by the FED might have encouraged risky investments. He would probably argue that this was just a piece of the puzzle. BUT, the fact is that as far as the deficit is concerned there was a projected surplus.

As much as you try to portray Krugman as some sort of hack or partisan radical, the reality is that he is just not that. In fact, it seems that it is you who are guilty of what Krugman calls the "fallacy of centrism." Krugman criticism of Republicans, Inflationistas, Austrians or anyone else he disagrees with is far far far from the accusations and hyperbole hurled at his direction or against liberals in general.

Throughout his columns, Krugman echoes the "Democrats good, Republicans evil" mantra. So, please don't try to claim that Krugman is just saying there is an honest difference of opinion.

Our government's fiscal condition in 2000 was not what was being claimed at the time. We balanced the budget (kind of) because the stock bubble brought out a lot of capital gains tax payments, and once the bubble collapsed, so did that revenue.

Krugman has been trying to float the idea (along with Begala and Bill Clinton) that cutting the top marginal tax rate from 39.6 percent to 35 percent is what caused the recession of 2001. I'm not sure how cutting a tax rate would cause a recession, but I am sure Krugman has an answer.

"But while the blockade is over, its lessons remain. Some of those lessons involve the spectacular dysfunctionality of the Senate. What I want to focus on right now, however, is the incredible gap that has opened up between the parties. Today, Democrats and Republicans live in different universes, both intellectually and morally." -- Paul Krugman.

Krugman later goes on to essentially state that Democrats Good, Republicans Bad. Essentially that all right thinking intellectuals who are hip to the scientific consensus in economics (except for those who disagree who obviously are Republicans) are the innately aligned to the Democratic political will. Unabashed Political Hackery.

Again, more misleading statements without anything to back it up. I have noticed that whenever someone calls you on this you retort with "well Krugman has said that before." It seems to me that the hyperbole is coming from one side.

You are right that some of the revenue generated in the 1990s was from the bubble - the dot.com bubble. But can you credibly claim that nothing else contributed to growth or an economic surplus? Was there no actual value in the technological boom of the 1990s that led to one of strongest periods of GDP and job growth in US history and real growth in family income? Are you going to say that policies like welfare reform had no impact on the budget?

And can you credibly claim that GWB's policies (both economic and foreign) had no impact on the revenue stream of the US government?

Now, where has Krguman ever claimed that it was only the change in the tax rate that was the cause of the recession? I'm pretty sure he has said a thing or two about financial deregulation, starve the beast, and international trade somewhere :)

What you are doing (and it is a persistent theme) here is discrediting entire complex arguments by finding individual elements that you find distasteful. So now Krugman believes that it is solely the tax cut that tanked the US economy!? Or he believes that if we only regulated energy more we would be prosperous.

"So, at least Krugman is now willing to part with some of the Holy Doctrines of Keynesianism and advocate tax increases during a depression."

He says no such thing in his column.You are making this up. Straw man arguments, being your stock in trade.

"Herbert Hoover and Congress massively raised taxes "on the rich" in 1932, and we know how well that turned out, but since Krugman wants us to believe that the Progressive Hoover was radically laissez-faire"

Not just on the rich. They raised taxes across the board, a highly contractionary fiscal measure.

http://en.wikipedia.org/wiki/Revenue_Act_of_1932

And this makes the libertarian/Austrian line that Hoover was some kind of Keynesian utter nonsense too.

By pointing out that fiscal contraction is bad during a recession... you're now agreeing with Keynesians?? LOL.

The libertarians note that Hoover was an interventionist, not the laissez-faire True Believer that Keynesians and other "distorians" like to claim. Hoover also signed Smoot-Hawley and tried to help engineer a "recovery" through the building of public works and the Reconstruction Finance Corporation. Thus, we see at least some Keynesian measures.

Last year, Krugman was advocating letting ALL of the Bush tax cuts expire, not just the top rates. Furthermore, that would have meant that a large number of people would have seen substantial increases in their taxes, and Krugman advocated it. As for "fiscal drag," Austrians like to think of it as the burden of government.

Keynesians such as Krugman say that we can print and subsidize our way out of this morass. That is nonsense and always will be nonsense.

As a layman with a definitive conservative bent, I still find Paul Krugman's "paradox of thrift" logical. In an economy where the agents hoard cash as a "store of value" there will be reduced output and resulting poverty. There won't be a medium of exchange available so that workers can exchange their labor for goods, companies can trade etc. So a specialized economy like ours, where bartering doesn't just start from one day to the next, in the absence of paper money, will grind to a halt.

Incorrect, as usual. Krugman wanted only to let the highest bracket tax cut expire, not all of them. He thought, however, that the Democrats might need to hold their ground, even if it meant a tax hike for everyone, because Republican intransigence was becoming a threat to our political system. He had realized that Republicans believed that they could always bully Democrats into surrender. As usual, he was right; the debt ceiling debacle demonstrated just how dangerous this brinkmanship could be.

Also, Krugman acknowledges a long term debt problem; he simply asserts that we have time to implement gradual changes, and that any stimulus implemented right now, even if "huge," is not actually a large part of the actual future threat that will be brought about by entitlement spending.

But then, we should expect someone who confuses saying "fiscal outlook was pretty good" with "the U.S. economy was in perfect shape in 2000" to make such errors.

And of course, he does not actually say anywhere that lowering taxes caused the recession. He has only said that it did little good for most Americans, while sending the budget deficit soaring.

"There won't be a medium of exchange available so that workers can exchange their labor for goods, companies can trade etc. So a specialized economy like ours, where bartering doesn't just start from one day to the next, in the absence of paper money, will grind to a halt. "

Convicts in prison create their own economy with cigarette. Mor importantly though, the paper was never what people valued, it was what the paper could be redeemed for. Goods and services make the world go round. If one medium of exchange is no longer valid as a way of relating prices, we will find another one. Have some faith in your fellow man.

We should vote on the dumbest and lamest Keynesian Ruse Koncepts. "Paradox of thrift" should be up at the top of the list.

What an utterly preposterous "concept" intended to confuse and baffle average people into giving up their rights. Those right should be an impregnable wall against the rapacious predator state and people are tricked by the Keynesians into giving them up to solve the problem that does not exist, unemployment under laissez faire.

Over at his blog, LK is still shooting his NERF bullets against the Austrians and missing. And he puts SO MUCH ENERGY into it.

http://socialdemocracy21stcentury.blogspot.com/

I always find it satisfying to note that our opponents have basically nothing whatsoever to throw at us other than insults. We win again.

Simply pathetic. I am still amazed that this moron could be bestowed upon a Nobel prize...Oh, wait, it is the same category of morons who make up the Nobel committee!

Hoover a laissez-faire practitioner? LOL

Raising taxes increases revenues? LOL again since, knowing who he is, he is not talking within the constraints of the laffer curve!I guess that is why in the 1950s - with the top rates in the 90s - we tripled and quadrupled the federal tax revenue, right? ...Oh, wait once again ..NOT!!!

This political hack makes less econ sense than an average college student who is just starting econ 101.

Pa's concern was that the medium of exchange would not be abundant enough to facilitate all possible transactions. The problem with this question is the assumption that the present medium of exchange is the only possible one, when the reality is that people will adopt whatever medium of exchange suits their needs. That was the entirety of my point which whiffed over your head.

His second question about the paradox of thrift is very telling about his familiarity with austrian economics To even suggest that individual savings somehow damages the economy is an outright ridiculous idea to anyone who puts the tiniest amount of critical thinking into it. Not to mention that individual savings is the foundation of all economic prosperity and growth. Without real savings fueling economic expansion you get the booms and collapses that have typified the american economy, and by virtue that the dollar is the world reserve currency, the global economy for the past two decades.

"""Also, Krugman acknowledges a long term debt problem; he simply asserts that we have time to implement gradual changes, and that any stimulus implemented right now, even if "huge," is not actually a large part of the actual future threat that will be brought about by entitlement spending."""

LOL the Whimpy J. Wellington way to government solvency. And we have nearly a 100 years of a history showing how well it's worked so far!

""I'll gladly pay you Tuesday for a hamburger today.""

Of course the Diner owner at least had the option of opting out. Something that none of us have the option of doing. Our fates are tied to a couple of Princeton political pygmies.

I'd like to see somebody on the right be a good opponent for Krugman ... but this ain't it.

Consider the following passage.

"Now, it is one thing for someone like Paul Begala to claim that the U.S. economy was in perfect shape in 2000, and that the recession of 2001 was the result of the Bush administration "talking down the economy."

The implication is that Krugman is making the same claim as Begala. But he is not. Krugman does not say that the W administration caused the 2001 recession. So you are not arguing with Krugman, you are arguing with somebody very silly who you are calling "Krugman." Not the same thing.

The implication is that Krugman is making the same claim as Begala. But he is not. Krugman does not say that the W administration caused the 2001 recession. So you are not arguing with Krugman, you are arguing with somebody very silly who you are calling "Krugman." Not the same thing.

Yeah, Krugman never blamed Bush. He wrote a book about it, but that book was probably wrote by some other Krugman.

Your criticisms amount to a great deal of obvious resentment of more "respectable " institutions. (Am i detecting a touch of Nobel envy?... Yes I DID go there!)A big dollop of name calling , but very little if any evidence of serious criticism based on economic analysis and historical example. Whats more damning in my point of view is, other than a repetitive statement of your opinion that Krugman is a political hack ... I learn absolutely nothing! God help your students out there at Frostburg!

That last one is funny. Yeah, if I were Armen Alchian (who is a real economist, unlike Krugman), maybe I would be envious, but I cannot say I envy Krugman at all.

You critics always seem to give a free pass to Krugman's outright nastiness, yet I cannot think of one other Nobel winner who has written the kind of personal invective that we see regularly from Krugman. As for your learning "nothing," I cannot help it if you believe that Keynesian theology is good economics.

Ahum, if taxing the rich and redistributing the money creates jobs out of thin air, would not taxing the poor create even more jobs? The larger the tax base the better. Maybe if we tax the future generations too, e.g. by taxing the incumbents 200% instead of 100% we create even more jobs?

About Me

I teach economics at Frostburg State University in Frostburg, Maryland. We are located on the Allegheny Plateau, and we have cool summers and tough winters.
I am the single father of five children, four of them adopted from overseas and I have two grandchildren. My family and I are members of Faith Presbyterian Church (PCA).